Full interview at inpractise.com

Is the demographic of Airbnb's users really that much different than other OTA's? And what happens if all online travel agencies end up with all of the same inventory?

We explore the competitive dynamics and more with a Former Head of Supply at Airbnb.

The full interview includes:

  • How Airbnb built the host and guest community
  • Recruiting early consumer hosts and building trust with people sharing their homes
  • How to market and onboard hosts
  • Challenges for Airbnb recruiting professional properties versus OTA's
  • Airbnb take rate and pricing strategy versus Booking.com
  • Regulatory risks for Airbnb

Do you think Airbnb has a very unique guest demographic than other OTAs or intermediaries that it can provide to traditional hotels and professional property managers?

Yes, I would say so. I think Airbnb did actually a fantastic job of building that guest demographic which I think is hundreds of millions of people by the beginning of this year. Also, capturing people that effectively, a significant amount or Airbnb's traffic was direct to their website. Therefore, if it's going direct to Airbnb, it's like it's not necessarily going through a Google or other search engine or channels to get to Airbnb. I think that was a big part of it. Certainly, a significant part of the millennial demographic and so on, as well, would often go to Airbnb first and see that as something that has an offering that might not be able to be found on existing OTAs, as well.

That direct traffic could also mean that Airbnb could actually charge a lower rate though to the host, I assume, as they don't have to pay for that traffic.

Yes, potentially. From the early days, for example, the thing with fees is that it seems as though every player has chopped and changed in different ways over the past few years. It's a constant thing of just where they all end up. It seems as though everyone ended up at around the 15% mark. Actually, from the early days, Airbnb's fee structure was quite unique. It was a 3% charge to the host and back a few years, it was 6-12% to the guest. Even just having that guest fee was quite a unique thing. That actually helped with bringing a lot of hosts on. That was another thing that did actually bring on a lot of hosts in the early days. They did see that as a good offering, but you also had other channels until a few years ago that were offering subscriptions, or you would pay $500 a year and you would get unlimited bookings on that platform. That works really well if you're generating millions of dollars in bookings. That $500 is a fraction of a percent. If you're a host that wants to put your place up for one month, though, and you get a $2,000 booking, $500 is 25 percent.

It becomes very high, or instantly it just eliminates anyone that's doing this casually. By having a small host fee as a percentage base, I think helped bring a lot of those folks on and give them an option in terms of what they want to list. I would say that most of the platforms out there that were offering some kind of subscription service have probably gotten away from that. HomeAway was a big one. I think they've tried multiple different times and different ways to change their fee structures and I think they probably have about four different fee structures at the moment.

Airbnb certainly in the last 12 months or so has been toying with different host only fees and different things. Some of that probably came from different professional hotels wanting that. Again, different segments want different things. Hotels are very big on price parity, for example. Expedia and Booking have clauses in their contracts that would effectively say, whatever price you're giving to us is the same or cheaper than all other platforms. Some of those things legally, I know there has been court cases in different countries with Expedia and so on, that I believe has challenged some of those things. I think they're stepping back from some of those. For hotels, it was important to price their properties on all different channels, equally. When you've got a guest fee that maybe shifts a little bit, that becomes hard. Those different things and those challenges certainly came out of working with different segments at different times.

What's your view on the host only fee that Airbnb recently rolled out then for those traditional properties?

Ultimately, I think it is a good thing. If the host prefers that, I think that's fine. I thought that it was probably a good move on Airbnb's part. However, I would say that you want to be careful with everyone ending up with the same host fee and host structure because then people end up comparing on the basis of those things that might not actually be compatible. That becomes a challenge.

Also, if you're just competing solely on what fees you charge, it ends up becoming almost a race to the bottom. Then people start discounting, different things happen. Very often, it gets a bit messy and I don't think that actually benefits everyone in the long run. I think it's really about ultimately, when Airbnb is looking at its challengers, Booking, HomeAway or the Expedia network, you can eventually have 100 percent supply penetration across every single website. The winner is not going to be the platform who gets all of the supply. The winner is going to be the platform that gets all of the demand. I think that's going to be what it comes down to. Yes, you can have the best experience for the host, but if people are just not going there to book, what does it matter? It's about having a balance between both. I think the host only fee was the right move for a certain subset of hosts. I think having that option is good. I would definitely say that my encouragement to them would be to keep some of those existing options that hosts have used for the past 8-9 years on Airbnb from day one.

On that point then, let's play this forward 5-7 years, and if you're a host, either a small Airbnb or independent hotel, or a professional manager. You're going to want to list your property on as many channels as you want. Therefore, is there any reason why some of these hosts will typically prefer Booking versus Airbnb for example?

You're definitely going to have hosts that prefer one channel over another. That's going to happen and you're probably going to have it coming from different sides. It could be different experiences that they've had. You're going to have hosts that are going to want to push their direct booking channel, for example. Direct booking, you saw hotels were very big on driving direct booking.

I think direct booking when you're not a big hotel or not a big chain, it maybe comes across as easier than some of them think. When they think about in terms of what is the cost of actually generating that booking to their own channel, when they're actually bidding on Google Ads and so on, when they have issues, they've got to deal with charge back, different things. They've got to start factoring that into the costs. If suddenly the cost of doing that is 15-20%, when you factor it over a year or something like that, it's like is it actually better from a cost perspective. I think a lot of the professional hosts have started to think about that.

In terms of all of that inventory eventually ending up across multiple platforms, I think that's going to happen. You already start seeing a lot of the different technology that's already being built or is already out there to drive some of that. Whether it's channel managers or GDS systems and all of those other things. Eventually, you're going to want to be able to put your property in front of someone as much as possible. It's about getting to them at the right time of purchase or intent to purchase is going to be the main thing. That could come across in multiple channels.

How do you see the competitive nature between take Airbnb versus Booking in five/six/seven years out when you have – let's say they all have the same inventory?

Yes, it's a very good question. The issue of becoming too commoditized is a real issue. I think Booking.com is probably someone that potentially when you look at some of the things they've said on their earning's calls, I think they're probably worried about that. There's just not a lot of loyalty really there when you start doing that. I think that's also one of the reasons you've got all of these companies and different folks really focused on loyalty programs.

Then it really comes down to, if you're a guest and you do see the same property listed on multiple channels for the same price. You're probably going to end up going to the one you like, or you trust or that has something offering that you prefer. That's whether it's a loyalty program or a point system. Ultimately, that's where the winner is going to come from ten years down the track, a company that can really focus on that experience and provide high value-add services. That's where I know Airbnb was really focused on things like Airbnb plus program, different services that you can add on and make that booking experience seamless. Let's say you want to stay in a property, and you want the fridge to be stocked when you get there, something simple like that. How do you offer those services? Again, Airbnb did a great job eight years ago focusing on things like review system, payments, even their fee structures and different things like that. Every platform now has a two-way review system, they've all done that.